UK ad budgets upped 'markedly' at the end of 2016 despite Brexit but spend will fall in 2017, says latest Bellwether report

UK marketing budgets upped 'markedly' at end of 2016 despite Brexit, but British ad spend will fall in 2017 according to latest

The Institute Practitioners in Advertising's (IPA) latest Bellwether report has revealed mixed results, showing that marketers dismissed ongoing uncertainty in the UK by raising their budgets toward the end of 2016, but forecasting that ad spend will fall in 2017.

The most recent edition of the quarterly study details the findings for the final three months of last year. It revealed that UK firms shrugged off the economic uncertainty brought about in the aftermath of the EU referendum and US presidential election, with 13% more companies registering an increase to their budgets during Q4 of 2016.

The IPA reached this figure by calculating the percentage of respondents showing an improved revision to their marketing budgets minus those that indicated a fall. It was only marginally than Q3’s nine-quarter high of 13.4%, revealing growth has sustained over the past four years for the industry.

The data, which features original figures drawn from a panel of around 300 UK marketing professionals from the country's top 1000 companies, also noted that despite previous revisions to budgets, the unstable political and economic climate will continue to weigh on industry financial prospects in the first quarter of 2017.

A net balance of -14.6% of companies have signaled a "deterioration in their confidence" regarding industry financial prospects in the past three months, this was down on Q3’s -12.1% and the lowest level recorded for four years.

In spite of this, Bellwether has anticipated that ad spend will be found to have risen by 2.1% overall in 2016, up from its Q3 estimate of 1.9%.

"Understandably advertisers will be more cautious when deciding where their marketing budgets go and will be demanding clearer ROI to prove the worth of the mediums they spend in," said John Litster, managing director at Sky Media.

"Research has found that assumptions of average TV viewing is 20% less than it actually is, with live viewing assumptions underestimated by nearly 40% (87% of TV is still watched live). Whether it’s I’m A Celeb, Westworld, Bake Off or Buster the Boxer, TV is still the talk of the town. It’s the collective responsibility of all the TV companies in 2017 to better educate our customers about how strong TV viewing is and how robustly it’s measured relative to other media. I envisage in 2017 the 3 TV sales houses working ever more closely to market the continued fantastic brand building capability and trusted environment of Television - this at a time when other Media attempt to take revenue with products of lesser quality and dubious measurement.”

2017 UK adspend

However, punctuating this incline, Bellwether has forecast a fall during 2017 due to political uncertainty over Brexit negotiations which it believes will likely drag on investment. Coupled with the prediction that consumer spending is forecast to grow at a much slower rate, the result is a projected -0.7% annual fall in ad spend during 2017, unchanged from Q3’s estimate.

“The Michael Fish moment has been well documented about how wrong the forecasters were about the economy post the referendum decision and It's great to see that the great British public and business have turned a gloomy decision into a positive result," said Dom Carter, chief commercial officer at The Bridge, the commercial division at News UK.

"Clearly, there has to be caution as we approach the reality of Brexit and certainly consumer confidence will be impacted but the underlying business performance is still apparent. Advertisers need to hold their nerve during this uncertain time and continue to invest in areas that help their brands sustain for the long-term. For those that do, when consumer confidence begins to grow again, they will find a steeper return to growth. This isn't about driving click-throughs and likes but more about reaching highly influential and engaged consumers in trusted, professionally curated media, that will determine our path to continued growth.”

The news comes after findings reported earlier this week from Advertising Association (AA) thinktank Credos revealed that less than 25% of the UK's advertising agencies believe Brexit will offer opportunities for international growth.

Despite this prognosis, the IPA's director general Paul Bainsfair believes the IPA's report to be an overall positive reflection of the industry.

"After a year of well-publicised doom and gloom, Bellwether provides some welcome positive news," he said. "With marketers revising their budgets up yet again, the industry ends the year on a high. Furthermore, it is reassuring that despite the slight fall in adspend predicted by Bellwether in 2017 due to Brexit negotiations, growth is forecast for both 2016 and 2018."

Prime minister Teresa May yesterday (17 January) outlined her 12-point plan for Britain's EU exit, leaving the advertising industry waiting to find out how it will impact the sector with bated breath.

Her admission that Britain cannot remain part of the single market in the wake of the referendum has somewhat quelled the tide of uncertainty it sparked. With Bainsfar telling The Drum: "We now know where we stand, at least in the bigger picture. We can no longer bury our heads in the sand."

"No one knows the minutiae of what lies ahead. For the time being at least advertising itself will continue to come under scrutiny mostly from Brussels which despite Brexit will continue to influence us here for some time to come," he added.

In the immediate aftermath of the EU vote marketers scrambled to assess the impact of the result, quickly putting the brakes on ad spend. Shorty after, however ad giant WPP upgraded its industry forecasts and described the short-term affect as “negligible”.

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